What is a profitable distribution of exposures in insurance?

A profitable distribution of exposures in insurance refers to the balance of various levels of risk within a portfolio of clients. This approach involves combining high-risk clients, often seen as less preferable, with preferred and average risks, which are more stable and likely to result in fewer claims. By diversifying the risk profile, insurance companies can better manage their overall exposure and financial stability.

This balance helps to ensure that the premiums collected from the average and preferred clients can help offset the potential losses that may arise from the higher-risk clients. The essence of managing an insurance portfolio is not just to maximize profit from high-risk clients, but to create a sustainable model where risks are managed intelligently and profitably over time.

The other options suggest approaches that do not align with sound risk management principles. Concentrating solely on high-risk clients or disregarding risk factors altogether would likely lead to financial instability. Similarly, a technique that focuses purely on maximizing profit regardless of risk oversight would also be unsustainable in the long run. Therefore, option B correctly identifies the balanced approach necessary for a profitable distribution of exposures in insurance.